Question
From:
(redacted)
Sent:
Tuesday, September 09, 2008 5:23 PM
To:
Verne, B. Michael
Subject: Non-Obligation to File PremergerNotice
B. Michael Verne
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
Washington, DC 20580
Re: Hart-Scott-Rodino Treatment of Payment of Liabilitiesin connection
with the acquisition of equity interests
Dear Mike:
In a follow up to ourconversation on September 9, 2008, I have sent this letter to confirm ourdiscussions that the parties involved in the transaction described below do nothave an obligation to report the transaction under the Hart-Scott-Rodino Act,as amended (the "HSR Act").
In the proposedtransaction, the Purchaser will purchase from the Sellers (i) all of thecorporate shares and limited liability company interests in entities owning thebusiness and from which the business will be operated after the purchase, and (ii)all of the limited partner interests and all general partner interests of alimited partnership which holds certain real estate used in the business. Thetotal purchase price for the equity interests specified above to be paid by thePurchaser to the Sellers is approximately $43 million.
As a part of thetransaction and plans of the Purchaser, the Purchaser will payoff, to variousthird parties (which are generally unrelated banks), the $30 million ofexisting debt of the various entities referred to above. As a result of thetransaction, certain Sellers will be relieved of certain guaranty obligationsupon the pay-off of these debts. However, with regard to the debts, because (i)the debts are all current, (ii) the respective entities have paid and have theability to pay any and all obligations of the debts, (iii) the various debtsare collateralized with real and personal property of the respective entities,and (iv) the value of the collateral securing the debts substantially exceedsthe debts, the Sellers were never expected to incur any liability or make anypayments on these guaranty obligations. Consequently, the value to the Sellersof the payoff of the debts is minimal or zero.
If in applying thesize of transaction test, the total value of the transaction included thepurchase price for the shares and interests purchased and the debt to be paid,the total amount would surpass the $63.1 million threshold level for the sizeof transaction test.
You confirmed thefollowing:
a) This acquisition of corporate shares, limited liability companyinterests and the limited partnership interests is treated as a purchase ofequity in such entities and, therefore, for HSR Act purposes, the existing debtand liabilities of the purchased entities, whether or not paid or directlyassumed by the Purchaser, are not included in calculating the size of thetransaction;
b) Since the debt and liabilities are not counted for the size of thetransaction test, the transactions described above are not reportable under theHSR Act due to the failure to meet the HSR size of the transaction test; and
c) Because of the reasons set forth above in items (i) through (iv) above,the value of the Sellers' guaranties are minimal or zero and the release ofthose guaranties is not included in determining whether the size of thetransaction test is met.
At your earliestconvenience, please let me know if you agree with the above. Thank you for yourtime and assistance in working through the issues.
Sincerely,